Trump inches closer to exercising powers over medical supply chain

By Mark Rockwell

Mar 18, 2020

President Donald Trump signed an executive order that set the stage for him to tap special federal contracting powers granted under the Defense Production Act of 1950 to address a growing shortage of critical medical supplies, including ventilators, protective masks and more, in the COVID-19 response.

"We will be invoking the Defense Production Act just in case we need it," Trump said in a March 18 press conference. "In other words, I think you know what it is, and it can do a lot of good things if we need it.

What is it? The Defense Production Act of 1950 gives the White House authority to expand and allocate production of critical supplies in times of national crisis. The act authorizes the president to mobilize government contractors to produce goods and services for national security needs.

What good things can it do? When invoked, federal contractors are required to put the federal government first in line for delivery of needed items, ahead of commercial companies as well as state and local governments. In the current COVID-19 pandemic, that means suppliers of needed items to the Departments of Defense, Veterans Affairs and Health and Human Services will be required to prioritize their federal customers. The act also empowers the president to incentivize industry to ramp up production of needed items with loan guarantees and advance purchase commitments.

The executive order signed by Trump delegates certain authorities under the law to HHS Secretary Alex Azar but doesn't issue production demands as yet. Trump indicated as much in a March 18 tweet, saying in part: "Hopefully there will be no need, but we are all in this TOGETHER!"

The move is a pivot for Trump, who earlier in the week told the nation's governors on a conference call they might have better luck getting scarce hospital ventilators on their own, rather than waiting for federal help.

The Defense Production Act is not frequently invoked, but it did come into play in civil emergencies after Hurricane Katrina and the storms that hit Puerto Rico in 2017.

"There are a lot of unknowns here, but the Defense Production Act -- particularly the priorities and allocation system, including the use of DX ratings -- is not unfamiliar to experienced professionals and conventional defense contractors," Steven Schooner, a professor of procurement law at George Washington University Law School, told FCW in an email.

"The government has innumerable cross-servicing arrangements, for example, through the Defense Contract Management Agency for coordination and distribution," Schooner said. "Frankly, many of us consider the mobilization, production, procurement and distribution aspects straightforward enough that it's stunning -- and stunningly irresponsible -- that the White House didn't exploit these powers weeks ago."

The Defense Production Act could come into play on existing VA, Defense Health Agency and HHS contracts for needed equipment.

Sen. Maggie Hassan (D-N.H.) said she was "relieved" that Trump took the step of invoking the act.

"In addition to immediately releasing additional supplies from the Strategic National Stockpile, we must dramatically increase domestic production of these goods to ensure that our health care system is positioned to provide life-saving care as COVID-19 continues to spread," Hassan said in a statement. "I've called on the administration to take significant steps to ramp up domestic production, including invoking the Defense Production Act."

Hassan was part of a group of 28 senators who urged Trump in a March 17 letter to invoke the Defense Production Act. In a March 13 letter, Rep. Andy Levin (D-Mich.) and 56 colleagues asked the president to extend procurement authorities under the Defense Production Act to obtain needed items, as hospitals and health-care providers urged their workers to conserve gowns, masks and other critical medical items as they ran short of supplies.

Adam Mazmanian contributed reporting to this article.

About the Author

Mark Rockwell is a senior staff writer at FCW, whose beat focuses on acquisition, the Department of Homeland Security and the Department of Energy.

Before joining FCW, Rockwell was Washington correspondent for Government Security News, where he covered all aspects of homeland security from IT to detection dogs and border security. Over the last 25 years in Washington as a reporter, editor and correspondent, he has covered an increasingly wide array of high-tech issues for publications like Communications Week, Internet Week, Fiber Optics News, tele.com magazine and Wireless Week.

Rockwell received a Jesse H. Neal Award for his work covering telecommunications issues, and is a graduate of James Madison University.